The Indian real estate market is on an upward cycle and residential housing continues to be the star of the sector, HDFC Ltd Chairman Deepak Parekh said on Thursday. He added that unlike many other Western countries, the demand for housing in India is from genuine homebuyers and is not speculative in nature.

“The India real estate market is on an upward cycle which bodes well for all of us. The big star of the real estate sector continues to remain residential housing in India. I hardly need to reiterate that demand for housing in India continues to remain robust,” Parekh said while addressing the CII Real Estate event.

The greatest mark of confidence has been the strong pipeline of new launches, surpassing pre-pandemic levels, he said.

According to Parekh, the demand for housing continues to be from both first-time homeowners as well as those moving up the property ladder – generally into larger homes or houses in other locations.

Parekh said that in his over 50 years of work life, he has not seen housing affordability better than where it is today in India. Even the easy liquidity conditions, low levels of interest rates and a burning desire to be a homeowner have not been witnessed in the past.

In several western countries, one has seen housing prices run-up during the pandemic partly because the new supply did not keep pace and a large number of housing transactions were purely investment or speculative driven.

“In comparison, in India, demand for housing has come from genuine homebuyers, not speculators. Home prices have stayed fairly stable, low interest rates have helped and the real estate sector has already self-corrected and recovered from its previous down-cycle,” Parekh said.

He, however, said the mortgage to GDP ratio in India at 11 per cent is still low.

If one looks at the cohort of those working in sectors like IT, e-commerce, professional services, financial sector or those working in large companies, or the breed of new age entrepreneurs, income levels certainly have risen, Parekh said.

“In India as income levels rise, one will see younger people being able to afford housing sooner in life,” he said.

Parekh said that in certain high-end premium projects, one has already seen a price rise of 15-20 per cent but this is not the case across the board.

Barring a few metro cities, prices in the affordable housing segment have been stable and the sweet spot for housing is still in the price range of Rs 5 million to Rs 10 million, he noted.

Speaking on the rise in interest rates, he said a minor increase will not have an impact on the demand for home loans.

He said the real estate developers should focus on ESG (environmental, social and governance) as all incremental funding is perforce going to have ESG covenants embedded in it.

“It is important that the construction sector in India stays ahead of the curve especially on working towards a lower carbon footprint and reduced emissions,” Parekh said.

The sector has to be able to demonstrate greater efforts towards increasing the stock of green buildings, he added.